AUD/JPY Price Forecast: Does the dip towards 110.50 reinforce a modestly bearish outlook?

Selling pressure weighs on AUD/JPY around 110.60 as Thursday’s European session gets under way.
Despite the cross’s bearish bias, neutral RSI momentum leaves room for further consolidation.
Resistance first comes into focus at 111.15, while 110.20 marks the immediate support to monitor.

The Japanese Yen (JPY) draws some support against the Australian Dollar (AUD) from hawkish comments by Japanese authorities, leaving AUD/JPY in negative territory near 110.60 in early European trade on Thursday.

Underlying inflation is moving securely towards the central bank’s 2% target, Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Wednesday. His remarks followed those of BoJ Governor Kazuo Ueda on Monday, when Ueda said underlying inflation was close to the 2% target. Ueda also indicated that a rise in the bank’s short-term policy rate would likely be accompanied by a steady increase in long-term interest rates in line with policy.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Expectations of a November rate increase strengthened after Reserve Bank of Australia (RBA) monetary policy board member Andrew Hauser said on Wednesday that the inflation outlook was materially worse than the bank had projected. According to the Guardian, the probability of a rate hike at the November policy meeting rose to 45% from 30% before his remarks.

Can Japan’s exports sustain momentum despite below-forecast growth?

Japan’s external sector delivered another solid showing in the early September data, according to analysts at Deutsche Bank. They report exports rising by “+16.7% in September compared to the same month last year,” underpinned by “robust demand for semiconductors and AI-related products that continued to support growth.” Although the result missed the “expectation of a +21.3% increase,” the analysts stress that it “marked the 13th consecutive month of gains following a 9.3% rise in August,”. Turning to imports, Deutsche Bank notes that “imports rose by +18.9% y/y, falling short of the forecast of a +20.4% increase,”. The bank links this softer reading to a smaller external shortfall, citing “a decrease in imports” as a factor behind the narrowing of Japan’s trade deficit “to -536.6 billion yen in September from -1.11 trillion yen in the previous month.”

Technical Analysis: Can AUD/JPY shake off its mildly bearish bias below the 100-day SMA?

A recovery remains constrained within a broader corrective phase on the daily AUD/JPY chart: the cross trades above the 20-day Bollinger SMA but stays beneath the longer-term 100-day simple moving average (SMA), maintaining a mildly bearish bias. With the Relative Strength Index (RSI) near 50, momentum remains neutral. This favours consolidation over a clear bullish reversal while resistance overhead continues to hold.

Any advance would first encounter the upper Bollinger band around 111.15 before meeting a stronger hurdle at the 100-day SMA near 112.10. If the cross breaks decisively above that level, a rally could extend to the 16 June high of 113.55, followed by the 27 July high of 114.67.

For a move lower, the 20-day Bollinger midline around 110.20 provides immediate support, ahead of the psychological 110.00 mark. Beyond that, attention would shift to the lower Bollinger band near 109.20. A breach there would leave the cross exposed to deeper losses.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen: Frequently Asked Questions

Which factors shape movements in the Japanese Yen?

Among the most actively traded currencies globally, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specifically, influences on its value include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why do Bank of Japan decisions matter for the Japanese Yen?

Currency control is among the Bank of Japan’s mandates, making its actions an important influence on the Yen. At times, the BoJ has intervened directly in currency markets, usually to weaken the Yen. Such intervention is infrequent, however, because of political concerns among Japan’s principal trading partners. Between 2013 and 2024, the BoJ’s ultra-loose monetary stance weakened the Yen against its major counterparts as the policy gap between the Bank of Japan and other leading central banks widened. More recently, a gradual withdrawal of that ultra-loose stance has offered the Yen some support.

What does the Japanese-US bond yield gap mean for the Japanese Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ increasingly diverged from other central banks, especially the US Federal Reserve. The resulting widening in the yield gap between 10-year US and Japanese bonds favoured the US Dollar over the Japanese Yen. That differential is now narrowing as the BoJ’s 2024 decision to gradually move away from ultra-loose policy coincides with interest-rate cuts by other major central banks.

How does changing risk appetite influence the Japanese Yen?

During periods of market stress, investors are more likely to move funds into the Japanese Yen, which is widely regarded as a safe-haven investment because of its perceived reliability and stability. As a result, turbulence is likely to lift the Yen against currencies considered riskier investments.